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Salience and consumer choice

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  • Pedro Bordalo
  • Nicola Gennaioli
  • Andrei Shleifer

Abstract

We present a theory of context-dependent choice in which a consumer's attention is drawn to salient attributes of goods, such as quality or price. An attribute is salient for a good when it stands out among the good's attributes, relative to that attribute's average level in the choice set (or generally, the evoked set). Consumers attach disproportionately high weight to salient attributes and their choices are tilted toward goods with higher quality/price ratios. The model accounts for a variety of disparate evidence, including decoy effects, context-dependent willingness to pay, and large shifts in demand in response to price shocks.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1252.

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Date of creation: Apr 2010
Date of revision: May 2012
Handle: RePEc:upf:upfgen:1252

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Web page: http://www.econ.upf.edu/

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References

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Citations

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Cited by:
  1. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Salience and Asset Prices," NBER Working Papers 18708, National Bureau of Economic Research, Inc.
  2. Kalaycı, Kenan & Serra-Garcia, Marta, 2012. "Complexity and Narrow Bracketing in Credit Choice," Discussion Papers in Economics 13035, University of Munich, Department of Economics.
  3. Edward J. Webb, 2014. "Perception and quality choice in vertically differentiated markets," Discussion Papers 14-07, University of Copenhagen. Department of Economics.
  4. Mark Armstrong & Yongmin Chen, 2012. "Discount Pricing," Economics Series Working Papers 605, University of Oxford, Department of Economics.
  5. Keith M Marzilli Ericson & Amanda Starc, 2013. "How Product Standardization Affects Choice: Evidence from the Massachusetts Health Insurance Exchange," NBER Working Papers 19527, National Bureau of Economic Research, Inc.
  6. Justine Hastings & Jesse M. Shapiro, 2012. "Mental Accounting and Consumer Choice: Evidence from Commodity Price Shocks," NBER Working Papers 18248, National Bureau of Economic Research, Inc.
  7. Daniel Friedman (University of California at Santa Cruz) József Sákovics (The University of Edinburgh), 2014. "Tractable Consumer Choice," ESE Discussion Papers 240, Edinburgh School of Economics, University of Edinburgh.
  8. Cunningham, Thomas, 2013. "Biases and Implicit Knowledge," MPRA Paper 50292, University Library of Munich, Germany.
  9. repec:oup:qjecon:v:128:y:2012:i:1:p:53-104 is not listed on IDEAS

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